Correlation Between Canadian National and Honeywell International
Can any of the company-specific risk be diversified away by investing in both Canadian National and Honeywell International at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Canadian National and Honeywell International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Canadian National Railway and Honeywell International, you can compare the effects of market volatilities on Canadian National and Honeywell International and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Canadian National with a short position of Honeywell International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian National and Honeywell International.
Diversification Opportunities for Canadian National and Honeywell International
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Canadian and Honeywell is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Canadian National Railway and Honeywell International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honeywell International and Canadian National is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Canadian National Railway are associated (or correlated) with Honeywell International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Honeywell International has no effect on the direction of Canadian National i.e., Canadian National and Honeywell International go up and down completely randomly.
Pair Corralation between Canadian National and Honeywell International
Considering the 90-day investment horizon Canadian National is expected to generate 60.52 times less return on investment than Honeywell International. But when comparing it to its historical volatility, Canadian National Railway is 1.06 times less risky than Honeywell International. It trades about 0.01 of its potential returns per unit of risk. Honeywell International is currently generating about 0.41 of returns per unit of risk over similar time horizon. If you would invest 20,509 in Honeywell International on August 27, 2024 and sell it today you would earn a total of 2,551 from holding Honeywell International or generate 12.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Canadian National Railway vs. Honeywell International
Performance |
| Timeline |
| Canadian National Railway |
| Honeywell International |
Canadian National and Honeywell International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canadian National and Honeywell International
The main advantage of trading using opposite Canadian National and Honeywell International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian National position performs unexpectedly, Honeywell International can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Honeywell International will offset losses from the drop in Honeywell International's long position.| Canadian National vs. Union Pacific | Canadian National vs. CSX Corporation | Canadian National vs. Norfolk Southern | Canadian National vs. Westinghouse Air Brake |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
Other Complementary Tools
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio |